The militants were arrested in the Jebaliya refugee camp in Gaza, reports CBS News Correspondent Robert Berger, and are said to be members of the Popular Resistance Committees — disgruntled fighters who broke away from other militant groups.
Witnesses said militants and police exchanged fire for about 10 minutes during the raid.
The group has carried out roadside bombings against Israeli targets, but says it was not involved in the attack on the American convoy.
No Palestinian group has claimed responsibility for Wednesday's bombing, which killed three U.S. security guards and wounded a fourth.
A leader of the Popular Resistance Committees confirmed to Haaretz newspaper the arrested men were members, but "We made clear to the Palestinian Authority we had nothing to do with the bombing. We were stunned by the unjustified arrests."
It was the first deadly attack against U.S. official targets in the Palestinian areas and was likely to increase U.S. pressure on the Palestinian leadership to move against militants.
President Bush held the Palestinian Authority partially responsible, saying Wednesday that "Palestinian authorities should have acted long ago to fight terror in all its forms."
Involvement by the Popular Resistance Committees, which has issued a statement saying it was not involved in the attack, could prove particularly embarrassing to Arafat because of the group's links to the security forces.
Palestinians often accuse the United States of siding with Israel, but officials are careful not to cross the line of open hostility to Washington, combining their criticism with appeals for U.S. aid and protection. Arafat and Palestinian Prime Minister Ahmed Qureia condemned Wednesday's bombing and promised swift action.
Hamas, Islamic Jihad and Al Aqsa Martyrs' Brigades, violent groups behind scores of deadly bombings against Israelis, also distanced themselves from the attack.
Also Thursday, Israeli forces backed by 50 armored vehicles raided another section of the Rafah refugee camp on the Gaza-Egypt border in search of weapons smuggling tunnels. It was the third army raid of a Rafah neighborhood in a week.
A member of the Palestinian security forces was killed and 14 people were wounded in sporadic exchanges of fire, hospital officials said. Two minors were among those hurt.
In Wednesday's attack in Gaza, assailants detonated a remote-controlled bomb packed with dozens of pounds of explosives.
The blast smashed the heavy vehicle, flipped it over and left a crater in the road, the main north-south highway in Gaza. Two of the guards inside were killed instantly, said U.S. Ambassador Dan Kurtzer. Another died on the way to a Gaza hospital, and a fourth was treated in Gaza and then flown to a hospital in the Israeli city of Beersheba, where he was in stable condition.
An FBI team of investigators and forensics experts arrived in Israel on Thursday to investigate the bombing, along with Israeli police.
FBI agents do not intend to go into Gaza immediately. Instead, they will rely on the Israelis to collect and preserve evidence, with the FBI doing the detailed examinations of what is found, FBI officials in Washington said. On Wednesday, U.S. investigators at the scene were greeted by rock-throwing Palestinians.
The three Americans killed were identified as John Branchizio, 36; Mark T. Parson, 31; and John Martin Linde Jr., 30. They had been hired through a contract with DynCorp, a Virginia-based security firm.
The diplomats in the convoy, escorted by Palestinian police, were heading to Gaza to interview Palestinian academics who were seeking Fulbright scholarships to teach or study in the United States.
In the Jebaliya camp, Palestinian police were greeted by gunfire when they arrived in blocks 7 and 8 around midnight. Security forces searched seven homes before making the arrests. One of the suspects was identified as 25-year-old Ahmed Saker.
The Popular Resistance Committees was formed at the end of 2000, three months after the outbreak of Israeli-Palestinian fighting. The group consists of dozens of armed men, mostly Fatah breakaways or former members of the security forces. Other factions, including Hamas and Islamic Jihad, are also represented.
The group believes the use of force is the only way to end Israeli occupation of the West Bank and Gaza Strip. In the past three years of fighting, the group has blown up three Israeli Merkava tanks with powerful remote-controlled bombs — the same method used in Wednesday's attack.
Following the bombing, the U.S. government advised its citizens to leave the Gaza Strip. Kurtzer said from 200 to 400 Americans, some of them of Palestinian descent, work there, many for aid groups.
U.S. diplomats at meetings in the West Bank were returned to Jerusalem, said a U.S. official speaking on the condition of anonymity.
U.S. and Israeli officials said the attack underscored the need to dismantle Palestinian militant groups — a requirement of the stalled, U.S.-backed "road map" peace plan that Palestinian leaders have refused to carry out.
"The failure to create effective Palestinian security forces dedicated to fighting terror continues to cost lives," Mr. Bush said in a statement. "There must be an empowered prime minister who controls all Palestinian forces — reforms that continue to be blocked by Yasser Arafat."
It was the second attack this year on an American diplomatic vehicle in Gaza, U.S. officials said, pointing to an incident in June in which no one was injured.
U.S. convoys of armored black and silver Chevrolet Suburbans travel in Gaza almost daily and usually take the same route. The convoys are easily identifiable as American, though they don't fly American flags.
The Haaretz daily on Thursday quoted Palestinian security officials as saying they have repeatedly warned American diplomats that their travel arrangements aren't safe, and that the regular convoys in vehicles with diplomatic license plates were conspicuous. American officials routinely inform Palestinian security officials in advance of travel plans.
However, U.S. diplomatic official said they had no specific warnings that an attack was being planned. The official noted that there are no alternate routes to Gaza City, other than the north-south road.